David Bakke is a contributor and writer for Money Crashers Personal Finance, an online resource for smart spending and personal development.
Considering the current state of the economy and where it may be headed, there isn’t a better time than the present to start saving. Unemployment remains high, and the future of Social Security and Medicare is uncertain.
But in spite of these facts, many Americans say they’d rather spend today than save for tomorrow. Indeed, immediate gratification is a powerful motivator, but considering what can happen to you and your family if you don’t save can be pretty persuasive as well.
1. Look at Past Spending Mistakes
Have you ever racked up credit card debt that you had a hard time paying off? Usually, extra money in the bank can help alleviate or entirely eliminate spending mistakes. Because even if you buy something you shouldn’t have or get into a loan you can’t afford, extra money can help you fix the mistake and can keep you from piling up high-interest charges. Think about how having a little financial cushion would’ve made your life easier in the past, and start saving today to make your life easier in the future.
2. Review Your Retirement Portfolio
Look at how little you’ve saved in your retirement account. Really look at it and consider how long you can survive on that amount. Don’t forget that if your money is in a 401k at work or a traditional or Roth IRA, you’ll also have to pay income tax on whatever you withdraw in retirement. In fact, roughly half of all Americans have less than $25,000 saved, and approximately one-fourth have less than $1,000. If you’re in either group or know you’re behind, you could be in for a world of hurt or at least ramen noodles once you aren’t able to work anymore. And make no mistake, if you don’t have much saved, you’re likely to work as long as you’re physically able, perhaps well into your 70s. Consider that dose of reality and whether saving a little extra now is worth the effort.
3. Think of Your Children
If you do a poor job preparing for retirement, your children may have to rescue you. Not only can that be a blow to your pride, but they may not be able to afford it. Maybe you want to live with your children when you’re older, but if you have special needs, they may not be able to take care of you. Do you really want them deciding on which assisted living facility to put you in based on cost? Also, the added stress of caring for, supporting, and living with an older parent could put extreme strain on their relationships with each other as well as with you. Do you want your situation to be a contributing factor to sibling rivalry or even a child’s divorce? Probably not, so start saving now.
4. Set Goals
Simply deciding to save more money may work for some people, but the rest of us need tangible goals to strive for where we can measure results. Make 30, 60, and 90 day spending and saving goals to start. Also, determine how much you want to have saved by the end of the first year, and by the end of five years. Make a budget to help keep you on track, and consult an online retirement calculator or a financial advisor to help plan savings goals for retirement. Make sure to hold yourself accountable to these goals, and reward yourself for a job well-done.
5. Research How to Save
Many people put off saving because they simply don’t know how to go about it. Don’t let this stop you – research various ways to save online, such as saving on groceries and reducing home energy bills. One of your best resources is personal finance blogs.
Final Thoughts
Once you actually begin to save, determine where your savings will go. If you have high-interest credit card debt, pay that down to start. Paying down student loan debt and retirement savings are other common uses for your additional funds. Whatever you decide, know how much you’re saving each month and work your plan to benefit most from your efforts.
Can you think of any other ways to motivate yourself to save?